half and half 2 of 3

HALF AND HALF 2

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note: I've taken to using the Zote laundry soap as my bath/hand bar soap.  Cut it is quarters and it is 3.5 ounces a bar verses Ivory generic 3.1 ounce a bar.  Cost is 25 cents each verses 34 cents.  And it smells better.
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Yesterday, we didn’t even talk about the Petro-Dollar.  You know, I know, and Ross Perot knows that the PetroBuck is already on its decline/collapse stage.  The only reason the US didn’t collapse economically like the Soviet Union did after its Peak Oil was because we convinced/connived the House Of Saud to price their oil ( and, at the time that also meant the rest of OPEC also ) in dollars in exchange for military protection.  In effect, from that point onward all the nations that wanted to buy oil had to buy our Treasury Bonds first, and use them as the currency to purchase petroleum ( there is nowhere near enough paper currency to do the same and I would wager that keeping larger bills out of circulation had more to do with keeping cash out of the hands of oil buyers rather than drug dealers ).  In effect, all other nations had to offer real goods to buy our debt.  They weren’t buying our debt because they thought it was a good investment but because it allowed them to trade for middle east oil-the less polluted, less energy intensive to process, sweet light crude.

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Well, that happy little arrangement can only work for so long.  Somewhat because the Saudi’s are running out of oil, but mostly because while the American people are largely ignorant and continue their jingoistic orgasm, the rest of the world has already been put on notice that our military has become largely impotent.  Not important-impotent.  The Saudi’s are already forced to do our previous job of protecting themselves, largely through terrorist support and other clandestine activities, but also by sending boots into other countries.  Why do they need us again?  At this point, they are only paying protection money, hoping to delay their capital from being turned into radioactive glass.  But there are two things that will end that.  Actual protection from another superpower, or their country erupting in revolt ( to include their refinery being destroyed ).  Do you think either one isn’t possible very soon?

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Once no other country needs to buy our debt to buy oil, our dollar becomes instantly worthless.  At most, we continue getting about two million barrels a day from Canada ( Mexico has seem such a drastic reduction in output that they are barely a factor anymore ).  Add that to our domestic five and we are still suddenly seeing less than half the oil we presently use.  I would be worrying about this a LOT more than I’d stress over an EMP or solar flare.  It is guaranteed to happen, whereas losing our grid instantly has a lower probability of occurring.  The timing is, as in all other collapse scenarios, the only question.  Most of the issues with EMP’s could conceivably be attributed mostly to Yuppie Scum Survivalists and their wishful thinking that a debt jubilee is possible.  Losing the Petro-Dollar is a lot closer to reality. 

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The above seems to make a case for inflation.  After all, once fuzzy foreigners no longer get stuck with our inflation, how is our economy going to cope?  Inflation is nothing more than more credit being added to the economy, each dollar being diluted with more.  The government and the central bank LOVE inflation.  We are surely going to get more of it, right?  Such has been my reasoning.  Yet, even there we are going to see a caveat.  Going back to the desire of our central bank to limit the paper currency on hand, in effect forcing other nations to buy our debt if they wanted oil ( which is THE lifeblood of all modern economies and most countries ), there is a huge amount of credit in our system and almost no circulating paper money.  The government doesn’t print much more than replacement levels of currency already in existence.  In the event our banking system and credit infrastructure starts breaking down, that is bad enough.  Everyone buys on credit, from the farmer planting crops to the trucker buying fuel to transport that food.  That would almost be guaranteed to crash our system.  But on top of that, there would not be enough paper currency on hand to facilitate trade anyway ( just as in the medieval economy where there wasn’t enough silver or gold and barter was the only way to pay ).  This might be deflationary.  Not that I would count on it, as our current system is urban population fed by long distance transport, all sustained by oil, but you never know.

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Again, all this would underline the likelihood  of inflation over deflation.  And most likely that is good enough as far as your planning.  When I vacillate between inflation and deflation, what I’m really guessing at is the future utility of cash verses goods.  Not really the same thing.  “Deflation” is really just short hand for “need cash” and “inflation” is just short hand for “trade in cash for tangible items before it becomes worthless”.  With that distinction made, I think our argument makes far more sense.  Should I be “mattress stuffing” or should I be “alpha strategizing”?  Should I be hoarding cash money or should I be buying as much consumer goods as I possibly can?   I was always assuming that goods were far more valuable than paper because paper always, in the end, goes to zero value.  But as I’m looking around me, surrounded by consumables for both before and after the collapse, I can’t help but start to get really nervous.

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You can’t eat gold, nor can you eat currency.  But you also can’t survive in today’s world without some gold or cash.  The county won’t take cases of Top Ramen for property tax ( head on down to Kroger as they are having a great case sale right now.  Peanut butter is a buck a jar in case quantity and Top Ramen $3.50 a case.  No longer the Too Cheap To Care ten cents but as close as it gets these days.  Did you listen the last time I told you Albertson’s had Top Ramen on sale?  It was even cheaper ).  If ALL your spare Trading Units are in tangibles, how safe are you during unemployment or other calamities?  How can you buy fire sales?  More tomorrow.

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